German Chancellor Angela Merkel on Wednesday urged EU leaders to deepen fiscal and economic integration in the EU.

Addressing the European Parliament in her first visit since 2007, Merkel streessed the need for a deal on the EU budget during the next European Summit.

"A renewed economic and monetary union needs common economic policy. We can see it very clearly today, we didn't have and we don't have economic policy coordination which is binding (...). I will be supporting an ambitious plan of action in December for the new EMU. There should be concrete measures for all our partners.(...). We need the necessary interaction so that it can really work in the sense of greater economic cooperation that Jacques Delors talked about.", said German Chancellor Angela Merkel.

Responding to MEPs calls for a federal Europe, the German Chancellor said that a shift of powers to Brussels would be her long-term vision for Europe.

"Let's not longer think that with half measures we can solve the problem of the euro (...). Either we make the step to a federal Europe, or we have problems.", said Liberals leader Guy Verhofstadt."Of course the European Commission will one day become a government, the EU council a second chamber and the European Parliament will have more powers. But for now, we have to focus on the euro and give people a little bit of time to come along," Merkel said.

Only hours before meeting British Prime Minister David Cameron, the german Chancellor also said she believes the UK should remain in the EU.

"I want a strong UK within the EU. The UK was with us when we were liberated from National Socialism, I cannot imagine the UK not being part of Europe," Merkel said.Talks on whether Britain should distance itself from the Union are slowly spreading across the country. Cameron has repeatedly threatened to veto any deal on the EU budget if his demands for reducing it are not met.